New ACCA PII Regulations
Published: Wednesday, 28 June 2023
Changes ahead for ACCA member firms
Modernising the ACCA PII Regulations
With significant changes taking place in the insurance market in recent times, the ACCA have reviewed their current Professional Indemnity Insurance regulations and have endeavoured to improve and modernise these requirements to be more in-line with current trends.
The new Professional Indemnity Insurance (PII) regulations will come into effect on 1st September 2023.
What are the key changes to the PII requirements?
- For income up to £600,000 the PII limit must be two and a half times the firm’s relevant total income; and with a minimum limit of £100,000.
- If total fee income is greater than £600,000 then PII limit must be at least £1.5 million (the limits should be applied in local currency equivalents)
- The largest fee multiplier, of twenty-five times, has been removed from calculation of PII limits
- Sub-contractors must be included in PII and FGI policies
- Liabilities covered extended to include sub-contractors
- Work sub-contracted included in total income
- Uninsured excess restricted to £20,000 per principal
- Minimum PII and FGI increased from £50,000 to £100,000
- High risk exposures (such as such as cyber related events, tax planning or financial services) covered on an aggregate basis
- New regulations on Retroactive cover and Regulated work
- New definition of sub-contractor.
When do they come into effect and what is the transitional period?
These changes come into effect on 1st September 2023. Members will be given a 4-month period to adjust or obtain cover which is compliant with the new regulations. Renewal on or after 1st January 2024 must comply with the new requirements.
Will these changes help ACCA members?
Some of the changes implemented will be welcomed by both the insurers, brokers and members, for example the removal of the largest single fee multiplier, which often meant having to hold high limits of indemnity which was not necessarily reflective of the risk associated with the assignment nor the fees received from the work.
Another positive change is the increase in the minimum limit of indemnity from £50,000 to £100,000. With the current cost of legal fees, a limit of £50,000 isn’t really enough.
High risk exposures are now being allowed on an aggregate basis. This means that more insurers will be comfortable providing cover knowing that their exposure is limited, rather than declining cover all together. For ACCA members it means they will have more options in the market and therefore are not left without cover or having to apply for a waiver from the ACCA which can often be a long drawn -out process.
However, the requirement for increased fidelity guarantee insurance (FGI) may limit the market for members as insurers are worried about the rise in internal fraud and therefore may not want to increase their exposure.
The insurer may insist that the client takes out a separate Crime policy, which will cover the FGI, as they may not want to add this into their PII policy. This will potentially mean the members having to obtain two separate policies to comply with the ACCA’s regulations.
A surprising absence in the updated regulations is the need for members to hold cyber insurance. Cyber crime has increased exponentially and significantly affects professions such as accountants who can hold a large amount of client personal data. The cover provided under Professional Indemnity policies can be very limited and, in most cases, will not be adequate should a cyber incident occur.
Do I need to speak with my broker with respect to my policy?
Yes, you will need to find out if your insurer will be updating their policy and your cover to ensure that it is compliant with the new requirements. If not, then your broker will need to find compliant cover elsewhere.
Account Executive, Ntegrity